Google GBuy takes aim at PayPal

Google is preparing to launch an online payment system dubbed GBuy on 28 June, financial analysts with RBC Capital Markets claimed in a research note.

The service would allow online merchants to handle consumer transactions. Over time it could expand to include consumer to consumer transactions as well, the firm noted.

Google said in an emailed statement to vnunet.com that it has "nothing specific to announce at this time". The company typically does not comment on products before they are officially released.

GBuy is set to compete head on with eBay's PayPal service. RBC suggested that it will be free during the initial test phase and is expected to start charging a transaction fee of 1.5 to two per cent at a later stage.

To provide merchants with an incentive to join the service, stores accepting GBuy payments will be listed as 'Trusted GBuy Merchant' in Google's search results.

"If consumers view this as a mark of safety and security, it should increase [the] click-through rate," the RBC analysts noted.

This in turn could influence the overall ranking of the store on the results page and thereby favour GBuy merchants.

In addition to transaction fees, GBuy will provide Google with data on user buying patterns which can be used to better target search results and online advertising.

"If harnessed, the precision of this targeting could be revolutionary," the note said.

Increased targeting typically leads to higher advertising rates. But the study cautioned that merchants could resist Google using their transaction data beacuse it will bump up advertising rates.

The study failed to mention, however, that better targeted advertising should also lead to increased sales which could offset the added costs.

The financial analysts at RBC Capital Markets maintained an 'outperform' rating for Google stock with a target price at $465, about $80 higher than its current price.

Rumours about Google's GBuy online payment service have been going around since last summer.

The company currently handles payments for its AdSense advertising programme, the Google Video service and Google Earth. The search provider does not provide payment services to outside partners.